Risk and Legal Liability Mitigation Strategies for Agritourism.

1. Risk and Legal Liability Mitigation Strategies for Agritourism. Beth Crocker S.C. Department of Agriculture January 5, 2010

2. Overview • General Premises Liability & Landowner Duty of Care. • Statutory Liability Protections – Actual & Proposed • Right to Farm legal Challenges & Nuisance Suits. • The Importance of Business Structure – Personal Liability Protection • Other Common Legal Questions/Challenges for Agritourism Operation.

3. Disclaimer • Today’s presentation is not intended to provide specific legal advice, but rather a general discussion of potential legal issues related to agritourism activities. • This is an educational presentation.

4. Premises Liability • Generally: Landowner becomes responsible for injury or damages based upon his or her negligence in maintaining the property. • Example: Yellow signs put out when an area is wet or potentially treacherous. • Landowner has a different “duty of care” towards people on his/her land depending upon the status of the visitor. • Trespasser • Licensee • Invitee

5. Duty of Care as defined by S.C. Code Section 27-3-30. • “...an owner of land owes no duty of care to keep the premises safe for entry or use by persons who have sought and obtained his permission to use it for recreational purpose or to give any warning of a dangerous condition, use, structure, or activity on such premises to such persons entering for such purposes.”

6. Duty of Care and the status of the person on your land. • Accountability or your responsibilities towards people on your property. It varies. • Did they pay an admission fee to enter your property? • Did you invite them? • Do you advertise and hold your operation out to the public as a place of business? • Are they trespassing?

7. Duty of Care towards visitors on your property. • You owe the highest level of responsibility to those persons that you are conducting business with. (Invitee) Basically you owe a higher duty of care to your customers than you do to people who are invited onto your land, but no fee is charged. i.e. someone who wants to hunt or walk on your land, but no fee is charged. (Licensee).

8. Establishing Boundaries • Understandably, it is very important to establish boundaries on your property to help protect yourself from liability. • If you only intend for guests to enter or have access to certain parts of your farm/property, it is imperative that you clearly limit their access to other parts.

9. Insurance Coverage • Purchase Adequate Liability Insurance • Types – One size does not fit all. Pick the one that best fits your operation. • Talk to your insurance agent to determine what policy is best for you. • Obtain adequate liability insurance to cover your activities. • Understand the terms of your policy and know what activities and items are covered. • Provide updates to your insurance agent on a regular basis regarding any changes in the use of your property, purchases of equipment, building additions, or other changes. You want to make sure that these changes are properly covered by your insurance policy.

10. SC Statutory Liability Protections. • Recreational Use Statute. • Equine Liability Immunity Statute. • Proposed Agritourism Liability Protection Statute.

11. Recreational Use Statute • S.C. Code section 27-3-10 et al. Limits liability of landowners who do not charge for use of the land. • The purpose of the statute is to encourage landowners to make land and water areas available to the public for recreational purposes by limiting the landowners liability for any accidents that might occur while persons are on their property. • No cases involving an agriculture fact pattern. Cole v. South Carolina Elec. & Gas, Inc. 608 S.E. 2nd 859. (swimming death and discussion on landowner liability. Car admission fee paid, but swimmers themselves were not charged to swim).

12. Recreational Uses • As defined by statute, recreational purpose includes: hunting, fishing, swimming, boating, camping, picnicking, hiking, pleasure driving, nature study, water skiing, summer and winter sports and viewing or enjoying historical, archaeological, scenic or scientific sites.

13. Equine Liability Law. • This statute provide liability protection to equine owners who conduct equine activities on their property. • Signs must be posted on property in order for statutory protection to be triggered. • “WARNING - Under South Carolina law, an equine activity sponsor or equine professional is not liable for an injury to or the death of a participant in an equine activity resulting from an inherent risk of equine activity, pursuant to Article 7, Chapter 9 of Title 47, Code of Laws of South Carolina, 1976.”

14. Agritourism Limited Liability Legislation. • S. 104. Introduced by Senator Danny Verdin of Laurens. • This legislation seeks to limit the liability of landowners engaging in agritourism activities on the farm by providing • To qualify for the liability protection, farms must post liability warning signs. • Similar to the Equine Liability Law that currently exists in South Carolina. • This liability would be available even if farms were charging an admission fee for the agritourism event.

15. Statutory Warning • 'WARNING ! • Under South Carolina law, an agritourism professional is not liable for an injury to or the death of a participant in an agritourism activity resulting from an inherent risk associated with the agritourism activity.'

16. Other Legal Concerns. • Lawsuits and interpretation of the SC Right to Farm Law. • Recent lawsuit filed by Ernie Irvan against the Ambrose Farm. Case has been dismissed, but the situation is likely to arise again in other areas where agritourism is growing.

17. Irvan case • The Irvans weren’t suing to prevent the Ambrose’s from farming, they were suing to limit the customers coming out to the farm to pick produce and to pick up produce from the Ambrose CSA operation. (complaints of dust and traffic). • Specific to this case was the fact that the properties were subject to Covenants and Restrictions, as well as to Conservation Easement restrictions. • Likely that the Right to Farm law would come into play as a defense. Asking the court to extend the right to farm to the right to sell your farm produce on the farm.

18. How to Avoid or Limit Personal Liability in a Lawsuit. • Choose an appropriate business entity to limit liability. • This is not the only consideration when choosing a business entity, but it is often an indicator of the type of business entity that could be right for you.

19. Limit Liability through Business Classification. • Sole Proprietorship • General Partnership • Limited Partnership • Limited Liability Corporation ( LLC) • Corporations • Cooperatives

20. Comparison of Business Entities

21. Admissions Tax • When an agritourism operation charges a flat admission fee, it is likely that they will have to collect a 5% Admissions Tax per S.C. Code Section 12-21-2410 et al. • If an operation is charging for produce picked, or another way of charging for services on the farm, it might not be subject to the admissions tax.

22. Other Common Legal Questions/Issues for Agritourism Operations. • Taxation – Local county tax offices vary in how they choose to assess “agritourism” operations. • When is it strictly agricultural property? • When does it become commercial property or a commercial activity?

23. Property Taxation • When using your farm for commercial agritourism purposes, when does it lose it’s designation as “agricultural land?” Something that will likely vary from county to county until Dept. of Revenue comes out with a ruling, there is a court case or legislation that specifically addresses this issue. • Definition of “agritourism” is going to be very important for the purposes of determining taxation of agritourism operations.

24. Know your local laws; pay attention to local ordinances • Building codes and restrictions, as well as certain exemptions for agriculture. • Example - Signage –counties may have fines for unapproved placement of signs on the side of the road. Some counties charge up to $1,000 per violation.

25. Banker – to help you manage financial risks. Insurance Agent – to help protect you from unavoidable circumstances. Accountant – to help manage financial and tax liabilities. Attorney – to help manage legal affairs, business transactions and estate planning. Professionals who Can Help Manage Farm Liabilities

26. Creating a Resource for Extension Agents and Farmers. • Creating a SC Handbook for Direct Markets and Agritourism ventures? • Tennessee Example. • Legal Guide to Direct Marketing handbook example. • Others?

27. General Liability on the Farm QUESTIONS? Beth Crocker (803) 734-2193 bcrocker@scda.sc.gov